In today’s New York Times International edition, Francesco Giavazzi and Anil Kashyap give guidance for how the European Central Bank needs to organize its upcoming bank stress tests if they are to succeed.
“Europe is lurching toward an overhaul of its banking system. Later this year, the European Central Bank is set to assume the authority to supervise the 130 largest banks in the euro zone… In preparation for the handoff, the E.C.B. will conduct a “stress test” to gauge how the banks would fare if economic conditions deteriorated. But the central bank’s point person for these efforts, Danièle Nouy, appears to have misdiagnosed the problem…”
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